Question:

What are the four most common valuation multiples?

Answer hidden.

Answer:

EV / EBITDA:

Funds attributable to all investors
Higher up on the income statement
Does not include impact of capital expenditures so could make sense to use for a company where D&A is only a small % of revenue

EV / EBIT:

Higher Fixed costs
Makes sense to use where capex is a larger % of revenue and thus impacts the profitability of the company

Price / Earnings:

Earnings are the bottom line so takes into account D&A, interest, and tax expense
Just the funds attributable to shareholders. Government and debt holders have already been paid

EV / Sales:

If the company has negative EBITDA, not profitable yet, can be useful. Younger internet companies might be an example where it could make sense to use

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